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Income Tax Appellate Tribunal, “A”, BENCH KOLKATA
Before: SHRI A. T. VARKEY, JM &DR. A.L.SAINI, AM
Appellant by :NONE Respondent by :Shri P.K. Srihani, CIT(DR) सुनवाईक�तार�ख/ Date of Hearing : 09/04/2018 घोषणाक�तार�ख/Date of Pronouncement : 20/04/2018 आदेश / O R D E R Per Bench: These two captioned appeals filed by the assessee, are directed against the orders passed by the Commissioner of Income Tax (Exemption) [hereinafter referred to as the ‘CIT(Exemption], Kolkata, under section 12AA (1) (b) (ii)& u/s 80G (5) (vi) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), both dated 31.07.2017.
Since these two appeals pertain to the same assessee, identical issues are involved, therefore, these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
At the time of hearing, none appeared on behalf of the assessee, in spite of issuance of notice for the hearing and ld DR was present for the respondent Revenue. In the absence of any appearance by the assessee, the appeal is being disposed off ex-parte qua the appellant, after hearing ld DR on merits in terms of Rule 24 of the Income Tax Appellate Tribunal Rules, 1963.
M/s. Word For the World Fellowship & 2230/Kol/2017 4. In these two appeals, the assessee is challenging the action of the ld. CIT(Exemption) rejecting registration u/s 12AA and consequently denying of approval u/s 80G of the Income Tax Act, 1961.
The assessee trust was registered as a society under West Bengal Societies Registration Act, 1961 on 17.11.2015. The aforesaid society trust filed an application in Form 10A for registration u/s 12A of the Income Tax Act, 1961 on 19.01.2017. The CIT(Exemption) has refused registration and denied approval u/s 80G of the Act,for the following reasons:
(i).On perusal of application of assessee in Form 10A, the ld. CIT(Exemption) noted that a part of the donations received from the donors have not been routed through Income & Expenditure Account but directly taken to the Balance Sheet.
(ii).The donation received throughout the year have been deposited in Bank account during demonetization period amounting to more than Rs.1,00,000/-, the assessee did not submit any reasonable explanation on this deposit during demonetization.
Therefore, considering these reasons, the ld. CIT(Exemption) rejected the application for grant of registration u/s 12AA of the Act and denied approval under section 80G (5) (vi) of the Act.
Aggrieved by the order of the ld. CIT(Exemption), the assessee is in appeal before us.
We have given a careful consideration to the rival submissions and perused the materials available on record and after hearing the ld. DR for the Revenue, we are of the opinion that so far as grant of registration u/s 12AA of the Act is concerned, the CIT(Exemption)’s jurisdiction is only to verify the objectives of the institution and genuineness of the activities, meaning thereby that, he has to satisfy himself that the objects are charitable in nature and the activities being carried on or to be carried on are genuine, meaning thereby that, they are in consonance for achieving of Page | 2
M/s. Word For the World Fellowship & 2230/Kol/2017 charitable object and nothing else. So far as the violation of provision of section 13 of the Act is concerned, that is for limited purpose of taxing that amount and denying benefit of section 11 and 12 of the Act but cannot be a reason for refusing to grant registration u/s 12A of the Act or cancel the registration of the trust u/s 12A of the Act. It is clear from reading of section 12A & 12AA of the Act that what is intended thereby is only a registration simpliciter of the entity of a trust. This has been made a condition precedent for claiming the benefits of exemption under the other provisions of the Act regarding exemption of income, contribution etc. No examination of the modus of the application of the funds of the Trust or an examination of the ethical background of its settlers is called for while considering an application for registration. The stage for consideration of the relevance of the object of the Trust and the application of its funds arises at the time of the assessment. Where benefits are claimed by the assessees in terms of section 11 & 12 of the Act, the question as to the nature of such contribution and income can be looked into. At the time of registration of the Trust, going by the binding judgments of the Apex Court, what is to be looked into is whether the Trust is a genuine one and whether it is a sham institution floated only to avail the benefits of exemption under the Act. For that, we rely on the judgment of the Hon’ble High Court of Kerala in the case of Shee Anjaneya Medical Trust (2016) 382 ITR 399 (Kerala) wherein the same propositions were upheld by the Hon’ble High Court. We note that the question whether the activities of the trust which was formed with the specific intention to carry on certain charitable activities, are actually charitable in nature or not, would not arise for consideration at the stage of grant of registration to the trust u/s 12AA of the Act. Going by the specific words in section 12AA of the Act, what is germane to the issue is only as to the genuineness of the Trust and its activities. We note that there is no such finding in the impugned order of the ld. CIT(Exemption) that activities of the trust were not genuine. Going by the provisions of section 12A and 12AA of the Act, we hold that the grounds raised by the ld. CIT(E) (Registering Authority), explained in para 5 of our order, for rejecting of registration to the assessee trust cannot be Page | 3
M/s. Word For the World Fellowship & 2230/Kol/2017 sustained and ld. CIT(Exemption) ought to have examined whether activities of the trust are charitable in nature or not. Therefore, we direct the ld. CIT(Exemption) to examine the genuineness of the Trust and its activities and objectives and adjudicate the issue in accordance with law. Therefore, we allow these appeals for statistical purposes in terms of the discussion made (supra).
8.In the result, both the appeals filed by the assessee are allowed for statistical purposes.
Order is pronounced in the open court on 20/04/2018.